Late Payment From Clients
Discussion
Hi,
I've been in business now for about 18 months and up until now, I haven't had any problems with late payments from clients.
However, just recently a couple of clients have taken the piss and have not paid me within the time stated on the invoice. One was a new client and the other an existing one.
My invoices state clearly:
"Payment to be received within 30 days"
Which I think is more than enough time to pay for the work completed.
What I was wondering was what sort of extra information can I put on invoices to encourage clients to pay on time? Certain terminology? Also, what amount of interest can I charge on late payments? Is there a standard rate?
Cheers,
Rich
I've been in business now for about 18 months and up until now, I haven't had any problems with late payments from clients.
However, just recently a couple of clients have taken the piss and have not paid me within the time stated on the invoice. One was a new client and the other an existing one.
My invoices state clearly:
"Payment to be received within 30 days"
Which I think is more than enough time to pay for the work completed.
What I was wondering was what sort of extra information can I put on invoices to encourage clients to pay on time? Certain terminology? Also, what amount of interest can I charge on late payments? Is there a standard rate?
Cheers,
Rich
I think these days, regretably, stringing out payment is regarded as a legitimate part of the business process. There seems to be a knock on effect. For example, we deal with many blue chip companies who will often look to pay in 60 to 120 days. The money is a fairly safe bet, but we have to wait for it... therefore, our accouts dept is forced to drag out payment to suppliers, and try to negotiate extended terms, to avoid a cashflow crisis. It is legal to charge interest on late payers, but many do not, to avoid upsetting their customers. Alternative stratergies I have seen include early payment discounts, whcih are more palletable than late payment penalties.
Jon H
Jon H
Too many companies take the piss on credit terms despite knowing the difficulties it creates for small businesses. The simple answer is to badger their accounts department on a regular basis. Threats of interest etc don't hold much weight and levying the interest just creates more work for you.
Not being enough full time IT stuff at work I to occupy me I seem to have got involved a bit with credit control.
If there is no joy in getting payment after a few phone calls then details are passed to solicitor. In our case it doesn't happen until the invoice(s) have been due for at least a month.
We use:-
www.thomashiggins.com/
They issue letters (£1.75 each) to companies asking for payment in 7 days otherwise things move onto next stage, which I think is court.
The problem with this, of course is customers getting the 'ump so to speak and not being customers any more because you didn't show "flexibility".
If there is no joy in getting payment after a few phone calls then details are passed to solicitor. In our case it doesn't happen until the invoice(s) have been due for at least a month.
We use:-
www.thomashiggins.com/
They issue letters (£1.75 each) to companies asking for payment in 7 days otherwise things move onto next stage, which I think is court.
The problem with this, of course is customers getting the 'ump so to speak and not being customers any more because you didn't show "flexibility".
We had the same problem a few months ago...
First we sent a letter stating that if the invoice wasn't settled by xx/xx/xx with the money actually sitting (cleared) in our account on that date, then interest would be added to the amount owing. We did this hoping that it would encourage the person to pay, but it didn't. So a new invoice for the revised amount was sent on the date we stipulated with a letter stating that for every month or part month the amount was outstanding interest would be added accordingly.
This worked and within 2 days of sending the new invoice the account was settled in cash!!!
Now we try to get 50% of the money upfront before we do any work. We also state that services can be withdrawn for none payment of invoices. Only had to pull a site once, but it was only down for a couple of hours until the owner came with cash again...
Also putting BACS details on the invoices has meant that we've usually been paid on time. I know that it costs up close to 60p to write a cheque and only 15p to do a BACS transfer so we offer the same to our clients...
Hope this helps...
First we sent a letter stating that if the invoice wasn't settled by xx/xx/xx with the money actually sitting (cleared) in our account on that date, then interest would be added to the amount owing. We did this hoping that it would encourage the person to pay, but it didn't. So a new invoice for the revised amount was sent on the date we stipulated with a letter stating that for every month or part month the amount was outstanding interest would be added accordingly.
This worked and within 2 days of sending the new invoice the account was settled in cash!!!
Now we try to get 50% of the money upfront before we do any work. We also state that services can be withdrawn for none payment of invoices. Only had to pull a site once, but it was only down for a couple of hours until the owner came with cash again...
Also putting BACS details on the invoices has meant that we've usually been paid on time. I know that it costs up close to 60p to write a cheque and only 15p to do a BACS transfer so we offer the same to our clients...
Hope this helps...
PetrolTed said:
Too many companies take the piss on credit terms despite knowing the difficulties it creates for small businesses. The simple answer is to badger their accounts department on a regular basis. Threats of interest etc don't hold much weight and levying the interest just creates more work for you.
Aye,
I am faced with the same thing on a regular basis, the only option is to get people to sign up for a Direct Debit, but this requires a large (£50k+) bond to be left ...
The only workable option is, as you say, to badger and chase.. but thats neither a productive use of a memeber of staff, fun nor pleasant.
we've come to the conclusion that the only way to sort this is to get tougher, letting a bill drag out might be 'easy' but it gets to the point where the debter may try and default... and thats even less fun.
Luckily for us, we hold the clients kit, and our t&c are solid.
We stick BACS on all invoices, but 95% of all payments are still Cheques..
It largely depends on if you are likely to or want to do business with them again. If you do, try to get them onto a 'cash with order' basis, and/or withold future work until they pay up. If you don't, then you can explore other options - but bullying is a last resort I think.
I had a bad payer last year. I spoke to the woman who handled the money. She said, rather unpleasantly, 'I don't care if you get paid or not.' Nice.
So I started ringing up about 6pm (when she'd gone home but the directors were still there). After a couple of weeks the director I wanted answered the phone. I told him the problem, he went through the 'surprised' routine and offered to pay by credit card - which he promptly did.
As Norman Schwarzkopf said in Gulf War 1, 'Go over, under, round or through'
I had a bad payer last year. I spoke to the woman who handled the money. She said, rather unpleasantly, 'I don't care if you get paid or not.' Nice.
So I started ringing up about 6pm (when she'd gone home but the directors were still there). After a couple of weeks the director I wanted answered the phone. I told him the problem, he went through the 'surprised' routine and offered to pay by credit card - which he promptly did.
As Norman Schwarzkopf said in Gulf War 1, 'Go over, under, round or through'
Thanks for the replies.
I think like Ted said, a bit of persistence goes a long way. I think companies are more likely to pay you if you keep at them. I don't have any problems asking for money that I'm owed, no, it's not the greatest of experiences but I always feel better when the bank balance goes up. I would imagine that if I never said anything to my clients about late payments, even if it was just by a few days, they would start to think "well, if he's not going to ask, I'm not going to worry about it". This has been the case for me with late payments, that I mentioned in my first post. Both clients paid up eventually but it was the result of many phone calls and emails directly to the MD's of both companies.
The problem with some of my clients, is that there is a total lack of urgency in setting up their websites. Maybe it's just a characteristic of the web design industry but the process of consultation to completion can be very long, as they delay providing correct info, images etc. Therefore, it can take a number of weeks to be paid for work already completed but has been drawnout through lack of urgency from the client. I was talking to one potential customer last week who was adament that "this whole Internet thing, well, it's just a phase, isn't it". Twat!! That's the type of bollocks that I come into contact a lot of the time.
Cheers,
Rich
>> Edited by richmartin on Monday 12th January 22:36
I think like Ted said, a bit of persistence goes a long way. I think companies are more likely to pay you if you keep at them. I don't have any problems asking for money that I'm owed, no, it's not the greatest of experiences but I always feel better when the bank balance goes up. I would imagine that if I never said anything to my clients about late payments, even if it was just by a few days, they would start to think "well, if he's not going to ask, I'm not going to worry about it". This has been the case for me with late payments, that I mentioned in my first post. Both clients paid up eventually but it was the result of many phone calls and emails directly to the MD's of both companies.
The problem with some of my clients, is that there is a total lack of urgency in setting up their websites. Maybe it's just a characteristic of the web design industry but the process of consultation to completion can be very long, as they delay providing correct info, images etc. Therefore, it can take a number of weeks to be paid for work already completed but has been drawnout through lack of urgency from the client. I was talking to one potential customer last week who was adament that "this whole Internet thing, well, it's just a phase, isn't it". Twat!! That's the type of bollocks that I come into contact a lot of the time.
Cheers,
Rich
>> Edited by richmartin on Monday 12th January 22:36
Rich - this is the type of problem I face every month. Badger these people but keep it friendly. Ask if they need another copy of the invoice.
Find out what their standard terms are. A lot of companies work on net monthly accounting. You invoice in one month, say Jan, they then pay at the end of Feb/begining of March. I just make sure that ALL invoicing for a month goes out dated before the end of the month. I also make sure the inviocing is done and posted ASAP. No use moaning if you have delayed sending by a week or two?
Best of luck
Paul
Find out what their standard terms are. A lot of companies work on net monthly accounting. You invoice in one month, say Jan, they then pay at the end of Feb/begining of March. I just make sure that ALL invoicing for a month goes out dated before the end of the month. I also make sure the inviocing is done and posted ASAP. No use moaning if you have delayed sending by a week or two?
Best of luck
Paul
yes this is very common. try and get to know people in the accounts, many times we have had payments ahead of larger companies because we were on first name terms.Also i think some companies are on power trips knowing there withholding your money.We have one customer who has his account on stop nearly every month(he spends a lot with us so knows we wont cease working for him).luckily we now have a large amount of cash on completion jobs so in effect there helping to subsidise the slow payers.now dont get me on defaulting cheques....transax or not....
"(co name)reserves the right to charge interest at the rate of 3% above the base rate of National Westminster Bank Plc in force from time to time from 7 days after the date of engagement until full payment is received by (co name)."
One of the clauses in my contracts. Makes no difference of course.
One of the clauses in my contracts. Makes no difference of course.
I work in accounts and find that the being friendly with the opposite number does help considerably, also the other way round. If they are ok with you you do attempt to do everything you can to help get the payment quickly.
I hasten to add that my company has always had a policy of looking after small businesses, we either pay up front or arrange a regular influx of funding.
We were there once and won't forget it.
On the other hand a certain large company has not paid us for 12 months and the bill is huge. If they do not pay something soon it could sink this boat.
Eli
I hasten to add that my company has always had a policy of looking after small businesses, we either pay up front or arrange a regular influx of funding.
We were there once and won't forget it.
On the other hand a certain large company has not paid us for 12 months and the bill is huge. If they do not pay something soon it could sink this boat.
Eli
I was speaking to someone the other day who mentioned another couple of techniques.
One was something to do with bills of over 6 months old. You can apply to the VAT man to refund the VAT you've paid (depending on cash/accrual) on an invoice which may have knock on effects to the debtor?
The other was to get county court judgement forms drawn up and fax them over (without necessarily filing them with the court).
One was something to do with bills of over 6 months old. You can apply to the VAT man to refund the VAT you've paid (depending on cash/accrual) on an invoice which may have knock on effects to the debtor?
The other was to get county court judgement forms drawn up and fax them over (without necessarily filing them with the court).
What do you do when it is a friend of approx. 15 years which owes you money & the only answer you can get off them is 'you'll get it, don't worry'.
Is it worth falling out over, so do you just walk away & stop working for them, or do you go after money.
In my case the amount owed in question is only approx. 1k.
Is it worth falling out over, so do you just walk away & stop working for them, or do you go after money.
In my case the amount owed in question is only approx. 1k.
hobo said:
What do you do when it is a friend of approx. 15 years which owes you money & the only answer you can get off them is 'you'll get it, don't worry'.
Is it worth falling out over, so do you just walk away & stop working for them, or do you go after money.
In my case the amount owed in question is only approx. 1k.
Yes you walk away until they can pay - why should your business fund theirs in this way, they are not a friend if they treat you in this way
I ask them to tell me when I can get the money. If it's 90 days then fine, as long as they stick to it.
This is not ideal but you can at least plan around the problem rather than simply deal with it as it arrises.
I know someone who did a lot of work for a major oil company. They were taking over 100 days to pay and all threats of action were cast aside. So, he purchased petrol from their garages using cheques - but all the cheques were postdated for 100 days. Most of the time, the cashier never noticed. They eventually wrote to him threatening legal action if he didn't pay what was owed there and then. When he wrote back explaining the situation with his business, they paid up!!
This is not ideal but you can at least plan around the problem rather than simply deal with it as it arrises.
I know someone who did a lot of work for a major oil company. They were taking over 100 days to pay and all threats of action were cast aside. So, he purchased petrol from their garages using cheques - but all the cheques were postdated for 100 days. Most of the time, the cashier never noticed. They eventually wrote to him threatening legal action if he didn't pay what was owed there and then. When he wrote back explaining the situation with his business, they paid up!!
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